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Don't Tie Graduate Salaries To a Grad School's Reputation

12/14/2014 11:52 EST | Updated 02/13/2015 05:59 EST

It's not just the gender stereotypes. The case method, the gold standard in business education, is riddled with reductionist approaches offering "quick fixes" to complicated problems that promote act now, think later approaches to keen business students.

The recent controversy about an assignment in the first-year MBA course at the Rotman School of Management, Canada's premier business school at the University of Toronto, has sparked furor among students, prompting the Dean to issue an apology. The assignment portrayed a young woman who needed help from her boyfriend to evaluate alternative compensation packages. It played on the stereotypes of a ditzy female, who dreams about designer shoes, and needs help of her brainy boyfriend.

The stereotypes in the Rotman assignment are symbolic of the dominant trends in MBA education, including the case study method. Each week, the students are required to read several cases, which are loosely based on real-life examples from numerous industries and economies. Students are expected to gain a meaningful understanding of the challenge presented in each case by spending no more than a few hours reviewing it. This creates a false impression in the minds of the students who think that solutions to complex problems can be prescribed by investing only a few hours.

The Rotman case offers glimpses of the other structural limitations in the business school curricula, which are instrumental in building a culture of privilege where business school graduates feel entitled to large post-MBA salaries. The Rotman case describes the hypothetical situation where Elle Forest, the protagonist, has been offered a salary of $85,000 with a choice to accept either $20,000 signing bonus or stock options. Interestingly, many, if not most, MBA graduates in Canada do not earn $85,000 in starting salaries.

The case also promotes unethical practices. Elle's boyfriend in the case, Chip, encourages her to review notes from the Finance class to determine the value of stock options. Chip inquires if she still had access to a Bloomberg Terminal. The Bloomberg 'machine' mentioned in the case is likely the one located in the business school's finance lab. The implied intent is to use the Bloomberg Terminal for personal gains, which is likely to violate the License Agreement that often restricts the use of Bloomberg Terminals at schools solely for academic pursuits.

Unlike most other faculties and departments at universities, large business schools support resource-rich career centers, which promote job market candidates to businesses. Their goal is to get the highest possible salaries for the graduating MBA students. Students are encouraged to take the highest paying jobs, while they may be more suited for meaningful careers in the public or not-for-profit sectors where salaries are often lower. The MBA rankings further fuel this frenzy because higher post-MBA salaries are viewed favorably by many sought-after MBA school rankings.

Tying alumni salaries to school reputation is a harmful practice for several reasons. It creates a false impression that the worth of education is largely determined by the wages it enables. If higher post-MBA wages become a metric of success, then those who will find work in small- to mid-sized employment markets will be disadvantaged by default. Their wages will be, on average, lower than the wages earned by those who will work in, or near, mega employment markets, such as New York, Chicago, San Francisco, or London.

Discounting the school reputation because of the lower wages earned by its alumni makes no sense because wages usually reflect the local cost of living, which again is higher in large urban centers. Those who choose to work in small towns are unlikely to earn the high salaries that will make their schools shine in the MBA rankings.

At the same time, the MBA tuition fees for some 'elite' business schools have approached and even exceeded $100,000. The elite school graduates leave with sizeable debts that further constrain their career options, forcing them to choose jobs that pay high salaries.

It does not help when even the business school curriculum inculcates conspicuous consumption among students. In the Rotman case, Elle complains to Chip that her $85,000 salary is "just isn't enough to pay the rent." Right there the curriculum is setting expectations for compensation in the minds of students encouraging them to expect starting salaries in excess of the median household (not personal) income in Canada.

Henry Mintzberg, a professor of Management at McGill University, has long exposed the flaws in the business curricula. In Managers Not MBAs, he argues that business schools are teaching the "wrong people" the "wrongs ways" resulting in "wrong consequences." He is not particularly opposed to the case method. He finds it troubling that the case method reduces decisions to be made "only by individuals acting as individuals," while we know that the complex organizational cultures and shared histories, and not just the personal traits of the business leaders, also act as enabling or disabling forces.

Graduate business education has to move beyond the MBA rankings that value starting salaries and not the courage of the entrepreneurs who embrace risk and low wages to launch new businesses, or those who see value in careers that do not offer the coveted six-figure salaries.

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